The SMSF Professionals’ Association of Australia (SPAA) has strongly endorsed the government’s clarification of its position regarding the Future of Financial Advice (FOFA) amendments, labelling it a step in the right direction for the financial advice industry.
The industry body had always supported the removal of the best interest duty catch-all provision because it was too broad and created uncertainty and an undue compliance burden for advisers, SPAA chief executive Andrea Slattery said.
Slattery said the government’s announcement last week about the FOFA amendments should serve to reassure the industry and consumers that the best interest duty had not been diluted.
“This was a point made strongly by SPAA’s patron and former chief justice of the High Court, Sir Anthony Mason, at the 2014 SPAA National Conference, when he said: ‘If it should come about that some aspect of the best interests duty is to be wound back, it would be a grave mistake to think that a financial adviser is under no duty to act in the interests of the client. Quite apart from relevant statutory provisions, the common law imposes a duty on an adviser to act in the interests of its client,’” she said.
SPAA said it was pleased by Finance Minister Mathias Cormann’s commitment to improving the professionalism of financial advice through lifting professional, ethical and educational standards, which were goals at the core of SPAA’s pursuit to improve the competency and quality of financial advice delivered to SMSF trustees and consumers more generally.
Slattery said Cormann’s announcement on conflicted remuneration and general advice was a positive move in addressing the industry’s concerns on the issue.
She said it had reinforced that there would be no wholesale reintroduction of commissions to financial advice.
“We are especially pleased to see that the amendments will still prohibit ‘any payment made solely because a financial product of a class in relation to which the general advice was given has been issued or sold to the client’,” she said.
Slattery noted FOFA was a critical element in improving the quality of financial advice and increasing consumer protection. However, SPAA wanted high-quality financial advice to be driven by a professional industry of competent advisers, she said.
She said SPAA would keep a close eye on the development of industry practices around the provision of general advice and the conflicted remuneration exemption. It would continue to work closely with the government to ensure the exemption did not lead to undesirable advice practices and consumer outcomes, she said.